Business against Europe

March 23rd 2011

The Euro Pact is a major step towards a corporate model of economic governance in the European Union, which will result in a major attack on social rights and living standards. So far, it looks like the big business lobby is winning the policy battle, at the expense of the rest of society.

Corporate lobby groups like BusinessEurope and the European Roundtable of Industrialists appear to have been very successful in their attempts to influence the emerging architecture for economic governance in the European Union. In a letter sent to European Council President Herman Van Rompuy on 4 March, BusinessEurope gave its support for the measures that were finally adopted by the Eurozone leaders in the so-called ‘Pact for the Euro’ (previously known as the ‘Competitiveness Pact’) which is expected to be endorsed at the EU Spring Summit on 24 - 25 March. Some important tweaks to the text – which were not in the original version but which were called for by BusinessEurope – have now found their way into the final draft. While business applauds the results, a realisation grows among unions, organised civil society and individual citizens that the Pact is against their interests, and demonstrations are planned across the EU, including one in Brussels on 24 March.

The Pact for the Euro calls for eurozone countries to freeze or reduce salaries, make everybody work for longer regardless of the nature of their work, increase taxes for ordinary people and reduce them for corporations and the ultra-rich. At the Summit this week, non-eurozone EU member states will be asked to join and Denmark has already signed up.

All those that do will have to submit yearly reports to the Commission with details of wage, taxation and pension reforms as well as broad outlines of their budgets. Eventually, these requirements will be integrated into the new framework for economic governance, the adoption of which will be finalised in the beginning of the summer. Getting member state budgets pre-approved at the EU-level has been a demand from big business since at least 20021.

These measures can be traced in the employers' lobby, BusinessEurope's, position papers throughout 2010.

On 4 March 2011, BusinessEurope also made some last minute suggestions on the pace of implementation for the ‘Economic Governance’ reforms and on the Commission's role in the new architecture.

The Eurozone summit is expected to back measures to give the Commission a strong role in the process, with an alliance formed by the Commission, big business and the Benelux countries2 backing this line.

Whereas BusinessEurope insisted that governments should submit their (anti-social) economic reform plans and general budget lines in April, the eurozone leaders are actually calling for governments to present their plans at the Spring Summit on 24 March. In the table below you can see the two basic changes which were proposed in BusinessEurope's letter of 4 March:

..we emphasize the need to give a prominent role to the Commission and limit room between Member States in the Council.

…a strong central role for the Commission in the monitoring of the implementation of the commitments

..each year MS of the euro area will agree at the highest level on a set of concrete deliverables to be achieved within 12 months. […] These commitments will also be reflected in the National Reform Programmes and Stability Programmes submitted each year and will be assessed by the Commission in the context of the European Semester.

Progress should be reviewed after 12 months and be reflected in the National Reform and Stability Programmes to be submitted in April this year.

Those MS in a position to do so should announce on 24 March the concrete commitments to be achieved in the next 12 months. In any event, concrete commitments should be included in the National Reform and Stability Programmes to be submitted in April and will be presented to the June European Council.

BusinessEurope has lobbied for measures which will only benefit big corporations and these have been set out in various BusinessEurope documents during 2010 and the start of 2011. These demands have subsequently appeared in each version of the Pact, from Sarkozy’s and Merkel’s first announcement to the Eurozone Summit's conclusions:

Description

BusinessEurope ’s positions papers throughout 2010

BusinessEurope Letter, March 4

Pact for the Euro,

March 11

Prohibit deficits by national law

‘transposition of debt and deficit rules into national law’ (June 2010)6

‘public debt brakes should be introduced into national laws’

‘Member States will retain the choice of the specific national legal vehicle […](e.g. constitution or framework law). The exact formulation of the rule will also be decided by each country (e.g. it could take the form of a "debt brake", rule related to the primary balance or

an expenditure rule)

Regardless of the differences in life expectancy of different professional and social categories increase retirement ages in line with average life expectancy

‘A closer link between retirement age and life expectancy is needed’(March 2010)7

‘better link the effective retirement age with life expectancy’

‘aligning the pension system to the national demographic situation, for example by

aligning the effective retirement age with life expectancy’

Weaken collective salary bargaining bringing it to the level where employers are stronger

'review the wage setting arrangements, and, where necessary, the degree of centralisation in the bargaining process…’

Prohibit or radically weaken automatic stabilization of real salaries

-

‘the removal of price indexation schemes’

‘…and the indexation mechanisms’.

[…]'Large and sustained increases may lead to the erosion of competitiveness'

Promote socially unjust taxation (indirect rather than direct taxes, taxes on consumption rather than on revenues)

‘a shift from direct taxes to less distortive indirecttaxes’ – March 20109

-

‘lowering taxes on labour to make work pay while preserving overall tax revenues’

Despite minor disagreements and horse-trading between governments on the implementation details of the new economic governance proposals, BusinessEurope, the Confederation of European Employers, seems to have managed to take advantage of the crisis ('shock doctrine' tactics) to implement demands that they have been making for the last 10 years. Governments which had previously endorsed ‘competitiveness’ and business-friendliness as the absolute priorities of the Union, were afraid of how the public would react to these socially unjust, policies. Now, the atmosphere of urgency has allowed governments to push them forward, perhaps hoping that society won't realise the impact.

The European Round Table of Industrialists, a club of 45 of the biggest European companies and a close partner of BusinessEurope,10 has also supported the adoption of the Pact in a press release which read: "Today’s Pact contains many elements that will bring the attainment of ERT’s Vision for a competitive Europe in 2025 closer"11.

This is yet another strategic moment in the history of European integration when the Commission has aligned itself with big business. The qualitative difference is that now the process is taking a clearly anti-democratic path, shifting powers from member-state parliaments to unelected or indirectly elected bodies such as the Commission, the Council and the European Central Bank.

The indicators and issues which are included in the Pact for the Euro (salaries, collective bargaining, pensions, tax policies etc.) are most probably going to be integrated in the ‘macro-economic imbalances procedure’ of the European Semester and the Economic Governance and Eurozone countries will be fined if they don’t comply.

At the launch of the European Semester on 12 January, 2011, Daniel Gros from the Centre of European Policy Studies talked about "the dictatorship of creditor countries and the European Central Bank". "They have the money, they call the shots,"’ he said. Nobody in the room challenged this specific wording, except, Mario Buti, the Commission’s current mastermind of the reforms, who said that Gros’ intervention was a "cheap shot". Further criticism has even come from within the Commission itself, when Commissioner Maria Damanaki recently complained that the current policy of "first consolidation, then job-creation may not work out in the long term" and could lead to "social degradation"

It is hard for even the architects of the reforms to deny that this is not about a transition from national democracies to a European one, but a transition to a less accountable form of economic governance that won’t correspond to the most elementary democratic concepts.

European citizens should not be scared or confused by the ‘shock doctrine’ deployed. This week millions of people will participate in demonstrations all over Europe against the ‘relaxation’ of social standards and the assault on democracy of an undemocratic integration surrendered at the hands of unelected bureaucrats who are under the spell of corporate lobbyists.